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Hugo Books Inc.is a retailer that buys books at a fixed price from publishers.Recently,Hugo offered a deal in which customers could buy a package of three mystery books at a discounted rate.Which of the following business models has Hugo Books combined?


A) agency and freemium
B) wholesale and agency
C) wholesale and bundling
D) agency and bundling

E) All of the above
F) A) and B)

Correct Answer

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Which of the following scenarios best illustrates bundling?


A) Clean Brush Inc. sells its electric toothbrushes for a low cost, but charges a high price for replacement brushes.
B) Cumulus Media Inc. sells its cloud computing network by having customers pay for the service as they use it.
C) Sharp Cable Inc. sells its basic TV channels for free but charges high prices for any channels that customers add on later.
D) Fresh Seeds Inc. sells seed packages, in which a person can buy a package of three types of seeds at a discounted price compared to buying the seeds individually.

E) A) and D)
F) B) and C)

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_____ is a business model in which the manufacturer sets a fixed price on a product,but the retailer is to free set its own price.


A) Agency
B) Freemium
C) Bundling
D) Wholesale

E) B) and D)
F) B) and C)

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_____ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it.


A) Economic value created
B) Break-even point
C) Consumer surplus
D) Cost of capital

E) All of the above
F) A) and C)

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_____ most precisely measures how well a company leverages its fixed assets,particularly property,plant,and equipment (PPE) .


A) Working capital turnover
B) Fixed asset turnover
C) Fixed assets to equity ratio
D) Capital leverage ratio

E) A) and D)
F) B) and D)

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In 2014,Apple had a return on revenue of 29.3 percent,and Microsoft had a return on revenue of 32 percent.Even so,Apple had a higher return on invested capital than Microsoft.Why did this happen?


A) Apple had a higher cost structure than Microsoft.
B) Apple was able to charge a much higher margin for its products and services than Microsoft.
C) Apple spent more on research and development and marketing and sales than Microsoft.
D) Apple had a much higher selling, general, and administrative expense that Microsoft.

E) A) and C)
F) None of the above

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The receivables turnover of VK Products Inc.is 13.6 and that of its competitor DL Goods Inc.is 6.0.What does this financial data primarily imply?


A) VK Products is less efficient than DL Goods in collecting accounts receivables.
B) DL Goods pays its creditors more quickly as compared to VK Products.
C) VK Products collects accounts receivables faster than AP Goods does.
D) DL Goods has a larger value gap as compared to VK Products.

E) All of the above
F) B) and C)

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Which of the following is the most accurate characterization of stakeholder theory?


A) an approach to understanding a firm as embedded in a network of internal and external constituencies that each make contributions and expect consideration in return
B) an approach to understanding a firm as being in a highly competitive industry, which requires the use of effective market capitalization to gain a competitive advantage
C) an approach to understanding a firm, which involves balancing tangible assets and intangible assets to achieve high accounting profitability
D) an approach to understanding a firm, which involves balancing multiple internal and external performance metrics in order to gain a competitive advantage

E) A) and C)
F) B) and D)

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Which of the following is not true of risk capital?


A) From the shareholders' perspective, the measure of competitive advantage is primarily based on return on their risk capital.
B) Risk capital invested in a firm can be legally recovered if the firm goes bankrupt.
C) A person who provides capital to a firm gets equity shares in return.
D) Return on risk capital includes stock price appreciation plus dividends received over a specific period.

E) C) and D)
F) A) and B)

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Which of the following questions challenges managers to come up with strategic objectives that ensure future competitiveness?


A) How do customers view us?
B) How do we create value?
C) What core competencies do we need?
D) How do shareholders view us?

E) B) and D)
F) B) and C)

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Which of the following is an advantage of the balanced-scorecard?


A) It is a tool for both strategic formulation and strategic implementation.
B) It allows managers to translate a firm's vision into measureable operational goals.
C) The balanced-scorecard is independent of the skills of the managers responsible for its implementation.
D) Its implementation is a one-time effort and does not require continuous tracking of metrics or updating of strategic objectives.

E) A) and B)
F) A) and C)

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Smart Feet Inc.produces shoes that are better quality and cost more to make than the shoes of its competitors.Smart Feet realizes that there will be a large difference between the cost to produce the shoes and the consumer's willingness to pay for them.Even so,Smart Feet decides to charge the same price as its competitors.Which of the following will most likely be the result of this action?


A) Smart Feet will go out of business.
B) Smart Feet will increase its marketability.
C) Smart Feet will gain market share.
D) Smart Feet will be bought by a competitor.

E) C) and D)
F) B) and D)

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TravelCheap Inc.is a car rental business that charges customers based on how many miles they put on a car on a daily basis.As result,a person who uses a car to travel from Chicago to Denver during a week is charged much more than a person who uses a car only to travel one mile to the grocery store six times a week.TravelCheap uses a business model called


A) freemium.
B) pay-as-you-go.
C) agency.
D) bundling.

E) C) and D)
F) A) and B)

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Janet is the CEO of Far Sight Inc.,which uses a triple-bottom-line approach.As a result,Janet will tend to


A) view superior financial performance as the sole objective of her firm.
B) expect her company to be socially responsible.
C) use fossil fuels to run her company's production plants.
D) ignore the ecological dimension for her company.

E) All of the above
F) C) and D)

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A defining characteristic of the subscription-based business model is that the


A) user pays for only the services he or she consumes.
B) user pays for access to a product or service whether he or she uses it during the payment term or not.
C) basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons.
D) initial product is often sold at a loss or given away for free in order to drive demand for complementary goods.

E) C) and D)
F) None of the above

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Mia has purchased an Internet package for three months,in which she can use 30 mbps Internet speed.However,for the service,she needs to pay a fee of $50 in advance irrespective of whether she uses the Internet during the service period or not.This arrangement best illustrates the _____ strategy.


A) razor-razor-blade
B) subscription-based
C) pay-as-you-go
D) freemium

E) A) and C)
F) B) and D)

Correct Answer

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The tenet behind the triple-bottom-line is that


A) a firm should solely focus on increasing the economic value created to/for its customers.
B) a firm's primary objective should be increasing the total returns to its shareholders.
C) a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy.
D) a firm's return on revenue can be broken down into three ratios: COGS/Revenue, R&D/Revenue, and SG&A/Revenue.

E) A) and D)
F) A) and C)

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Which of the following is not a factor that makes total return to shareholders and market capitalization unreliable measures of company performance?


A) the volatility of stock prices
B) the effects of the unemployment rate
C) variations in interest and exchange rates
D) the unpredictability of return on revenue

E) B) and C)
F) All of the above

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A firm incurs $100 to manufacture an office table.It fixes the market price of the table as $250,and discounts the price to $200.However,the maximum a person is willing to pay for it is $180.What is the amount of total perceived consumer benefits in this scenario?


A) $250
B) $200
C) $180
D) $100

E) B) and D)
F) All of the above

Correct Answer

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_____ is best described as a measure of how effectively capital is being used by a firm to generate revenue.


A) Return on revenue
B) Risk capital
C) Working capital turnover
D) Revenue per employee

E) A) and B)
F) A) and C)

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